Maybank IB Views

Tuesday, July 12, 2011

Plantation: Neutral
June's inventory surpassed 2m tonnes

Inventory at 18 month high. Malaysia's palm oil inventory rose 41.1% YoY to 2.05m tonnes (6.8% MoM) on yet another record June's production (1.75m tonnes; +0.7% MoM, +23.5% YoY). However, the higher production was offset by growth in exports at 1.58m tonnes (+12.4% MoM, +9.5% YoY). June’s inventory level is within market's expectation. Maintain Neutral on the sector. KL Kepong (Buy) and TSH Resources (Buy) are currently our top picks among the large caps and mid caps in the sector.

Industrial Production Index (IPI), May '11
Temporary Decline...

Industrial production (IP) growth in May '11 fell deeper into the red as it contracted by -5.1% YoY (revised Apr '11: -1.7% YoY; Maybank IB: -3.3% YoY; Consensus: -2.7% YoY). MoM, overall production dipped by -1.3% following a revised -7.2% drop in the preceding month. YTD, production was up marginally at +0.2% YoY (2010: +7.3% YoY). Mining output was the main culprit. For the second month in a row, mining output was the biggest drag on IP.

The FBM KLCI fell 6.16 points to close at 1,588.58 yesterday. Its resistance areas of 1,588 and 1,597 will cap market gains, whilst the weaker support areas are located at 1,576 and 1,584. Due to the US markets’ weaker tone last night; we will see some profit taking and liquidation activities in the local bourse today.

Trading idea is a Short-Term Buy on MUDA.

Other Local News
SapuraCrest, Kencana: Proposal to merge. Integral Key Sdn Bhd (IKSB), a special purpose vehicle, has made an RM11.85b offer to acquire SapuraCrest Petroleum Bhd and Kencana Petroleum Bhd. Received on Monday, July 11 offer letters from IKSB to acquire all their assets and liabilities in a share swap. IKSB offered to acquire SapuraCrest for RM5.87b equivalent to RM4.60 per share and Kencana was offered RM5.98b or RM3 per share. The offer shall remain open for acceptance until 5pm on Aug 15. (Source: Bursa Malaysia)

Tenaga: To implement new tariff in Sabah from July 15. The new tariff structure is also to promote efficient utilisation of electricity by the consumers. In this restructuring also, the tariff for Federal Territory of Labuan will be realigned to mainland Sabah since Federal Territory of Labuan is supplied from the Sabah network system, and more appropriate to be subjected to Sabah's cost of supply structure rather than that of Peninsular Malaysia. (Source: Bursa Malaysia)

KPJ: Inks JV to set up specialist hospital in Perlis. KPJ Healthcare Bhd has inked a joint venture agreement with Yayasan Islam Perlis (YIP) to set up and operate a new hospital to be known as KPJ Perlis Specialist Hospital. It said the JV would operate under the name Perlis Specialist Hospital Sdn Bhd, of which KPJSB would hold 60% equity interest while YIP would hold the remaining 40%. (Source: Bursa Malaysia)

E&O: Sells building, land on Penang island for RM134m. Eastern and Oriental Bhd (E&O) is expected record about RM66m in profit from the sale of a building and freehold land in Tanjong Tokong on Penang island for RM134m cash, if based on the building and land costs totalling RM67.7m. its unit had entered into a sale and purchase agreement Soaring Profit Sdn Bhd to sell the 27,743.7 sq m of land and building with 269,418 sq ft of gross floor area and 1,042 car park bays. (Source: Bursa Malaysia)

Silk Holdings: secured four long term contracts worth RM39.75m from Petronas Carigali Sdn Bhd for the provision four units of anchor handling tug supply vessel (AHTS). The contracts for the four units of AHTSV were for the primary period of one year, with various effective commencement dates in July 2011 respectively, with options to extend for a further period of one year each. (Source: Bursa Malaysia)


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